Twitter Sentiment and IPO Performance : A Cross-Sectional Examination

In this paper, we examine the cross-sectional relationships between 325 IPOs' first-day returns and their corresponding Tweet sentiment as defined by iSENTIUM LLC's sentiment engine over the period from 2013 through 2014. We find that Tweet sentiment is positively correlated to contemporaneous IPO returns. Interestingly enough, we document a positive relationship between prior days' (1 day, 2 days and 3 days) Tweet sentiment and next-day IPO returns from offer price to open price while a negative relationship between prior days' (1 day, 2 days and 3 days) Tweet sentiment and next-day IPO returns from open price to close price. Nevertheless, our examination of relationship between intra-day Tweet sentiment and intra-day IPO returns yields insignificant results. We document that Tweet sentiment matters for IPO first-day performances but the nature of this relationship appears very complex